Verizon's Asia foray puts Telstra in its sights

AMERICA'S largest telco, Verizon, is making a stronger push for small and mid-sized business customers through the Asian region in a move that will see it competing head-to-head with Australian providers such as Telstra.

By InvestSMART · 8 Nov 2012

By InvestSMART ·
8 Nov 2012

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Verizon has "significant plans" for its secure internet and cloud computing products around the region after a company restructure earlier this year. While it is not targeting Australia specifically, it wants more business through the region as part of a global marketing drive.

Even so, the growth of Australia's services sector makes local companies a target, Verizon's chief marketing officer, John Harrobin, said.

"We believe that we are positioned to be one of the handful of players worldwide that can serve the mission-critical needs of enterprise customers," he said at Verizon's annual Asia-Pacific media forum.

The move into the region puts Verizon in direct competition with Telstra, which wants its international arm to sell more global data and telecommunications services to companies with offices around Asia.

Telstra owns an under-sea cable network in the Asia-Pacific region and Hong Kong mobile company CSL New World Mobility Group.

Telstra's chief executive, David Thodey, recently cited expansion into Asia and more multi-national corporate clients as a key strategic priority for Telstra in 2013. However, he admitted Telstra was not going after the largest companies because it was still too small.

Mr Harrobin noted that Telstra still lacked infrastructure in key growth areas in Asia.

"Telstra has done a remarkable job with respect to building a company within Australia and [has] very laudable plans to deploy globally as well.

"But when you look at where the opportunities are and the assets that are required to serve them . . . if I were to compare their asset base with other asset bases, I would probably conclude it would be harder for them to expand globally without certain partnerships."

Verizon already provides telecommunications for some Australian government departments and to companies in the financial services, mining and manufacturing industries. It is not only targeting global companies, but would happily provide cloud-computing services to medium-sized companies that only have Australian operations, Mr Harrobin said.

IT services were moving from a premise-based service to a cloud-based service and this would be a huge disruption in the sector, he added. "It is in this discontinuity for Verizon to reposition itself in the market place and capture additional value."

Verizon merged its global wireless and global wholesale, enterprise and government divisions earlier this year to create Verizon Enterprise Solutions. This arm contributes about a quarter of Verizon's annual revenue, which reached $US110 billion ($105 billion) last year.

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Frequently Asked Questions about this Article…

What is Verizon’s Asia expansion strategy and why should investors care?

Verizon is pushing harder into the Asian region after an internal restructure, promoting secure internet and cloud-computing products to small and mid-sized business customers as part of a global marketing drive. For investors, this matters because it represents a strategic growth push into high-growth markets and increases competition with established regional players, which can affect market share and revenue growth prospects.

How does Verizon’s move into Asia put it in competition with Telstra?

Verizon’s regional push for enterprise, cloud and secure internet services brings it into direct competition with Australian providers like Telstra, which is also trying to grow its international business. Both firms target corporate customers across Asia, so Verizon’s expansion increases competitive pressure on Telstra’s international arm and services business.

What specific services is Verizon offering to businesses in the Asia-Pacific region?

Verizon is promoting secure internet services, cloud-computing offerings and telecommunications solutions for enterprise and government clients. The company said it would serve global companies and medium-sized businesses (including those operating only in Australia) with cloud-based IT services and connectivity.

What is Verizon Enterprise Solutions and how significant is it to Verizon’s revenue?

Earlier this year Verizon merged its global wireless, wholesale, enterprise and government divisions to form Verizon Enterprise Solutions. That arm contributes about a quarter of Verizon’s annual revenue; the company reported roughly US$110 billion in total revenue last year.

Is Verizon specifically targeting Australian customers with its Asia push?

Verizon says it is not targeting Australia specifically but wants more business across the Asia-Pacific region as part of a global campaign. Nonetheless, it would happily offer cloud and telecom services to medium-sized Australian companies and already provides services to some Australian government departments and industry clients.

What strengths and weaknesses of Telstra does Verizon highlight in the regional battle?

Verizon’s chief marketing officer acknowledged Telstra has done well building a business in Australia and has assets like an under-sea cable network and Hong Kong’s CSL New World Mobility. However, he noted Telstra still lacks infrastructure in some key Asian growth areas and may find global expansion harder without partnerships.

Which Australian industries already use Verizon’s telecommunications and cloud services?

According to the article, Verizon already provides telecommunications services to some Australian government departments and to companies in the financial services, mining and manufacturing industries.

Why is the shift from premise-based IT to cloud-based services important for investors watching telcos?

The article describes the move to cloud-based IT as a major disruption in the sector. For investors, that shift presents both risk and opportunity: incumbent telcos that successfully reposition to offer cloud and managed services (like Verizon aims to) can capture additional value, while those that lag may face competitive pressure.